All about the Twitter acquisition

26Sep 2016

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Twitter surged 22.9% on Friday. CNBC reported that Twitter had received expressions of interest from several tech and media companies and may receive a bid soon, and named Salesforce.com and Alphabet as potential buyers. Buying twitter can be profitable in various ways. Twitter’s main source of revenue is advertising. And its strength is quick information, the usefulness and impact of which is highly valuable. However, twitter’s user growth has remained stagnant and analysts suspect that if it doesn’t sell now, twitter may become the next yahoo. The user growth has been stagnant for 6 straight quarters. And advertisers aren’t spending as much as expected. RBC Capital Markets recently surveyed the advertisers and commented that Twitter’s proposition to them may be waning. Twitter is also in the middle of a strategic makeover, and is trying to change into a content – heavy platform. Though there haven’t been any bids yet, Twitter’s board has hired Goldman Sachs and Allen & Co to solicit potential buyers. According to a Bloomberg estimate, Twitter is worth $16.7 Billion.

Google and Twitter

Google’s primary revenue has been advertising. It sells ads related to people’s search queries to make its revenue. With Google’s Display ads, which is based on demographics, you can reach users who you know have an interest in your products. Facebook is currently the leader of this kind of advertising since it knows a lot of details about its user base. Google tried to initiate a social network with its Google+, but has failed. Acquiring Twitter may help Google in competing with Facebook on the social media and display advertising front.

Salesforce and Twitter

Salesforce, in the past three years has acquired companies which are focused on building software with humanlike abilities to recognize patterns, make decisions, and learn from experience. Such softwares require huge amounts of data. However, Salesforce already has full access to Twitter’s stream, due to its alliance with twitter in 2012. Salesforce recently unveiled an Artificial Intelligence software, called Einstein, which can analyse tweets and other data. Salesforce may lose access to the data if Twitter is acquired by a different company, however, if Salesforce acquires twitter, the data can be kept out of reach from its competitors.

Stockal Parameters on Twitter

Stockal Confidence Meter is at 54%. It is a proprietary algorithm, which gives us a weighted aggregate of analyst recommendations, derived from a pool of over 200 analysts. On Sunday, Canaccord Genuity restated its “Buy” rating for Twitter in a research note. On Friday, Despite RBC’s downgrade to “Underperform”, and a Price target cut to $14 from $17, TWTR traded 22.9% higher due to news of a buyout. RBC downgraded Twitter, citing waning interest from advertisers. Several other research reports have been done on twitter recently, with a majority of analyst giving a “Hold” rating. Deutsche Bank, Vetr, Suntrust Banks among others have been bullish on the stock.

Stockal Sentiment Index is 50% Positive. Sentiment Index is a proprietary algorithm, which gives us the sentiments of investors based on various social media like Twitter & Stocktwits. Stockal Social Media Pulse, which tracks the chatter on social media for stocks, is 100% higher than normal. With the news of Twitter closing in on a sale, the stock price shot up last Friday and has gained a positive momentum due to the news.

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